By Dr. James “Jim” Kadlecek
The Doña Ana County Board of Commissioners has on its agenda for today’s meeting a momentous decision. It has to do with a scheme proposed by an
I first wrote about this situation a couple of weeks ago. If approved, the proposal would dedicate future county and state gross-receipts-tax revenue from this area to pay for the development of a large residential-commercial subdivision and two industrial parks. In essence, the developer would get a subsidy of $113 million to cover development costs, many of which should be part of the normal price of doing business.
I’ve learned that the developer intends to come back to the county for even more public assistance, probably by asking the county to create a property improvement district that would levy additional property taxes on the purchasers of homes and land in their subdivision. Apparently, the intent of the developer is to have government finance the majority of its private development.
Of course, the developer also expects the county to provide utilities, street maintenance and police and fire protection to residents. That will strain the county, because a portion of the revenue the county would have received from the development in this area would go, under the proposal being considered today, to repay the bonds the developer used to pay for the infrastructure in the development.
Similarly, if the county approves this proposal, the next stop is the state Legislature, which will be asked to sacrifice significant future tax revenue, again, so those taxes can be used to reimburse the developer for his costs of development. Yet, the developer will also expect the state to provide a variety of state-funded public services to its residents including public education, highways, health and social services, etc.
Shifting the cost of development
This scheme is a complex and clever way to shift the costs of doing real estate development from the private sector to the public sector. We know when infrastructure is completed and zoning is granted by the county, considerable value will be gained by the private developer. What is now desert will be commercial land and residential lots. Yet, I assume the developer won’t be willing to share profits.
Under this proposal, substantial profits would be achieved by the developer without the risk that other developers must take to build a subdivision. In addition, since the developer owns much of the land around these developments, that property would also increase in value significantly.
I’ve also learned that the tax increment development districts (TIDDs) the Verde Group wants the county to create would be like separate units of government with their own boards of directors. If the county commissioners allow it, after four years the landowners could vote in their own board of control. Since the vote is based on acreage owned, and since the developer would still own most of the land, the districts would be totally controlled by the developer.
In short, there would be no oversight by elected officials over the development or the use of the public funds.
A dangerous precedent
One of the real dangers of this proposal is the precedent that it sets. If this developer can get this sweet deal, why shouldn’t other subdivision developers get the same treatment from the county? We will see proposals for TIDDs throughout the county, which will be giving up future revenues – the money it will need to cover the costs of the public services we all expect.
The only real protection we may have is that the state Legislature will see what a bad idea it is to allow local governments to form these tax districts for subdivisions and pass a new law preventing them.
Apparently the developers have said that if the county doesn’t approve this deal, this wonderful “new urbanism” subdivision may not be built. They claim that without public subsidy, the project is not economically viable for them. What that means is hard to say, but I suspect it means that they may not be able to make their usual high return on investment.
Of course, such a threat is part of a sales strategy as old as snake oil. Show people something they really like and want. In a land-development deal, use all the architectural techniques, presenting beautiful sketches and power points of how it will all look. Soften the officials up with promises, use all the correct “master” planning clichés and toss in some tours, dinners, etc. Then lay on them what they need to do, and imply that they are “partners” in this important project and need to do their part to make it happen.
Oh yes, make sure you call it “economic development,” and tout all the new jobs it will create. And emphasize what a wonderful public-private partnership this is, without, of course, mentioning that most of the benefit accrues to the private partner.
If the county approves the deal
If the county is insistent on approving this deal, the commissioners need to do some hard negotiating. First, they need to keep control of the TIDD boards; second, insist on financial guarantees from the developer; third, reduce the percentage of the tax increment that goes to the developers to no more than 50 percent; fourth, allot a percentage of the housing for workers that is truly affordable; fifth, tie the developer to a specific performance timeline with penalties if it fails to meet deadlines; and, finally, require that all of the jobs go to Doña Ana County residents, and the contracting work be done by Doña Ana County businesses.
The bottom Line: This area of the border is destined for development because it is a logical extension of the
Kadlecek has lived in